Q3 2023 Horizon Bancorp Inc Earnings Call
Participants
Lynn M. Kerber; Executive VP & Chief Commercial Banking Officer; Horizon Bancorp, Inc.
Mark E. Secor; Executive VP, CFO, CAO & Treasurer; Horizon Bancorp, Inc.
Thomas M. Prame; CEO, President & Director; Horizon Bancorp, Inc.
Brian Joseph Martin; Director of Banks and Thrifts; Janney Montgomery Scott LLC, Research Division
Damon Paul DelMonte; MD; Keefe, Bruyette, & Woods, Inc., Research Division
David Joseph Long; MD & Senior Analyst; Raymond James & Associates, Inc., Research Division
Nathan James Race; Director & Senior Research Analyst; Piper Sandler & Co., Research Division
Terence James McEvoy; MD & Research Analyst; Stephens Inc., Research Division
Presentation
Operator
Good morning, everyone, and welcome to the Horizon Bancorp Inc. Conference Call to discuss financial results for the third quarter of 2023. All participants will be in listen-only mode.
(Operator's Instructions)
After today's presentation, there will be an opportunity to ask questions.
(Operator's Instructions)
Please note this event is being recorded. Before turning the call over to management, please remember that today's call may contain statements that are forward-looking in nature. These statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those discussed, including those factors noted in slide presentation. Additional information about factors that could cause actual results to differ materially is contained in Horizon's most recent Form 10-K and its later filings with the Securities and Exchange Commission. In addition, management may refer to certain non-GAAP financial measures that are intended to help investors understand Horizon's business. Reconciliations for these measures are contained in the presentation. The company assumes no obligation to update any forward-looking statements made during the call. For anyone who does not already have a copy of the press release and supplemental presentation issued by Horizon yesterday, taking access at the company's website, horizonbank.com. Representing Horizon today are the Executive Vice President and Chief Commercial Banking Officer, Lynn Kerber, the Executive Vice President and Chief Financial Officer; Mark Secor; and Chief Executive Officer and President, Thomas Prame. At this time, I would like to turn the call over to Mr. Thomas Prame. Please go ahead.
Thomas M. Prame
Good morning, and thank you for participating. We're pleased to share our third quarter results that were highlighted by strong loan growth led by our commercial banking team, a resilient and stable core deposit portfolio and an increase in our noninterest income performance. Not unlike the first half of 2023, the team continues to manage expenses very well, and you'll see in our presentation, our credit quality performance remains a positive foundation for the franchise. Within our comments today, we will update you on our fourth quarter and full year outlook as we continue to strategically manage our balance sheet, portfolios and pricing and expand revenue sources, conservatively manage risk and maintain ample capital and liquidity that we believe will position us well as we move into 2024. We'll offer more detail on our third quarter results, let me introduce Lynn Kerber, our Executive Vice President and Chief Commercial Banking Officer, to provide insight into our lending and credit performance. Lynn?
Lynn M. Kerber
Thank you, Thomas. Beginning on Slide 6, we show that commercial loans increased to $83 million for the quarter or 13.1% on an annualized basis. Net fundings were $96.8 million for the third quarter versus $128 million for the second quarter. Our average commercial loan yield was 5.80% for the portfolio and 7.5% for new production. New loan originations continue to be very diverse across our markets and industries. In the third quarter, 1/3 of our originations were commercial and industrial, which is a continuation of some expansion in this category. The overall commercial pipeline increased from $118 million at June 30 to $145 million as of September 30. Activity continues to be well diversified by industry and geography with 51% in Michigan and 49% in Indiana. Commercial credit quality remains strong with low past dues of 8 basis points for quarter end, nonperforming commercial loans decreased 16% in the quarter and year-to-date net charge-offs were 1 basis point on an annualized basis. Turning to Slide 8. You will see that consumer directed loan balances increased $64 million during the quarter, which consisted primarily of increases in home equity loans. This increase was partially offset by intentional runoff in indirect auto loans. This change in mix is consistent with our strategic plan of redeploying capital to higher-yielding product sites. The average consumer direct yield was 8.05% for the portfolio and 8.96% for new production. The average yields for Consumer Indirect was 3.25% for the portfolio and 9.51% for new production.
Consumer past dues increased in the third quarter for both consumer direct and consumer indirect reflective of the broader economic conditions. However, consumer nonperforming loans remained stable. Year-to-date, net charge-offs for Consumer Direct are a net recovery of 1 basis point and consumer indirect charge-offs were 31 basis points. Slide 9 highlights our mortgage loan performance for the quarter. Our portfolio was stable and consistent with our expectations for 2023, aligning with our industry trends. Thus far, for 2023, 67% of our year-to-date production is salable. The average mortgage loan yield was 4.23% for the portfolio and 7.63% for new production. With 0 charge-offs for the quarter, this portfolio continues to reflect high-quality borrowers with significant payment capacity and equity in their homes. Our asset quality metrics continue to be strong, as outlined on Slide 10. Net charge-offs for the third quarter were $722,000, representing to basis points of average loans. Nonperforming loans improved to 0.45%. Past dues continued to be low at 30 basis points of total loans for the quarter. Finally, our allowance for credit losses was maintained at $49.9 million, representing 1.14% of total gross loans, which we believe is appropriate given the low level of past dues and nonperforming and charge-offs and current economic forecasts. Credit quality across all of our lending classes is performing well and reflects our history of consistent and well-balanced approach to lending. Now I'd like to turn things back to Thomas who will provide an overview of our deposit portfolio and trends.
Thomas M. Prame
Thank you, Lynn. I appreciate the insight in the detail. Transitioning to our deposit base, which is going to start on Slide #12. As noted, Horizon has a seasoned and very granular portfolio with an average client tenure of about 10 years. A majority of these balances continue to be held in our transactional relationship accounts that know and trust to Horizon well. Additionally, in Q3, the portfolio displayed less than 20% of balances being uninsured. As I stated in my opening remarks, we're very pleased with our third quarter deposit performance, maintaining Horizon's core funding stability and limiting additional funding needs from brokered and/or wholesale balances. On Slide 13 provides detail on the resiliency of the portfolio, and the team continues to be very upbeat about its strength. Our core consumer and commercial relationships were stable with minimal changes in total balances. The combined portfolio balances changed approximately 0.64% for the quarter. Public funds balances were also stable and experienced some heightened pricing pressures for excess liquid funds this quarter. However, the portfolio continues to maintain a significantly lower cost of funding when compared to alternative wholesale options. The quarter closed with brokered CDs and other fixed rate borrowings flat with ample borrowing capacity available if needed. As we saw in Q2, cash flows from our operations and securities portfolio provided a positive Fed funds sold position of $72 million at the end of Q3. This excess liquidity will continue to provide options in the fourth quarter for higher-yielding asset growth or flexibility in deposit pricing. As mentioned previously, the deposit portfolio continues to deliver strong results in terms of stability, resiliency and flexibility in our funding. Let me hand the presentation over to our Executive Vice President and Chief Financial Officer, Mark Secor, who will walk through our current highlights and our income statement and key financial metrics for Q3. Mark?
Mark E. Secor
Thank you, Thomas. Our third quarter results were positive on many fronts. As Lynn stated, we had quality loan growth from the commercial team, improved noninterest income and continued a disciplined operating model in respect to expenses and credit and our approach to new loan production spreads and strong loan growth shifted lower yielding assets into higher yielding loans. In Q3, we experienced elevated deposit pressure on commercial and public liquid funds, putting pressure on the net interest margin and net interest income in the near term. However, we will continue to actively manage pricing and our balance sheet to begin improving the net interest margin over the longer term. Starting with Slide 14. Noninterest income improvement over the linked quarter was led by increases in gain on sale of mortgages and other income from sale of assets, while most other line items remain consistent. The company is continuing to diversify core fee income categories that align with our relationship banking model. Going forward, we also expect our investments in treasury management and private wealth capabilities to contribute additional fee income to Horizon's revenue mix. Slide 15. Our efforts to manage our operating expenses continues to be a strength for Horizon. Noninterest expenses were 1.81% of average assets for the quarter compared to 1.86% last quarter.
Our long-standing commitment to being agile in this part of our business model and consistently reviewing opportunities to reduce expenses and streamline processes continue to be a priority, and you can expect it to remain our focus throughout 2023. Noninterest expenses improved modestly even with an elevated FDIC insurance expense that was offset by lower quarter-over-quarter expenses in several other categories. Salary benefits in the third quarter were slightly lower based on stable headcount and modest reductions in commissions and other variable compensation. Our loan and deposit pricing management maintained a strong spread as displayed on Slide 16. While it narrowed in the quarter, we believe a 414 basis point spread in Horizon's loan and deposit pricing remains healthy, compares favorably to Per's recent median and has the ability to improve over time. The results highlight our disciplined loan pricing for new loan production and a greater focus on originating higher-yielding loan products. We will continue to focus on loan spread management, product shift into higher-yielding loan products and cash flow reinvestment at higher rates. Of course, these results also reflect our efforts to retain quality, durable end market relationships in a highly competitive market for deposits.
Moving to the investment portfolio on Slide 17. It totaled $2.8 billion at the end of the quarter, down $26 million from June 30. The portfolio had a book yield of 2.21% and an effective duration of 6.7 years at the quarter end. As longer-term investments were originally identified as held to maturity, the duration of that portfolio is 2.2 years longer than the available-for-sale portfolio. Expected cash flows from investments are estimated to be $25 million for the remainder of 2023 and a total of $120 million over the next 12 months, but we continue to actively review strategic options for this portfolio. Slide 18, Horizon continues to maintain solid regulatory capital ratios well above the required requirements to be considered well capitalized, and we believe we have sufficient capital to be open to options to improve our earnings outlook in the foreseeable future. We anticipate that growth in capital will outpace the growth in total assets during the next 12 months, providing additional strength. As shown on Slide 19, we continue to maintain a strong cash position at the holding company with adequate cash to cover 8 quarters of fixed costs, including shareholder dividend. The cash position helps provide additional stability in uncertain times. And as mentioned previously, keeps the door open for strategies to improve our earnings. Horizon's current focus for the use of capital is organic earnings growth as current opportunities and market conditions make M&A less likely.
However, we remain open and receptive to discussions for profitable new revenue opportunities, both in acquisition and lift-outs. We expect to continue our targeted dividend payout ratio of 30% to 40%, continuing our 30-year-plus year of uninterrupted quarterly cash dividends. Based on our current stock price, our dividend provides a higher yield relative to the sector. Looking ahead on Slide 20, we provide you with an update on our current expectations for the fourth quarter and full year 2023. Our loan growth continues to be solid in both commercial and consumer sectors which should be valuable contributors to core earnings in subsequent quarters. For the fourth quarter and full year 2023, we expect 4% to 5% and 6% to 7% total loan growth, respectively. Our net interest margin and net interest income trends should continue to benefit from our balance sheet and pricing management. And we expect a net interest margin of 2.33% to 2.38% for the fourth quarter and 2.5% to 2.55% for the whole year. We expect net interest income of $40 million to $42 million for the fourth quarter and $174 million to $176 million for all of '23. We anticipate the net interest margin to reach its floor in early 2024, assuming the Fed funds target reaches its terminal rate in the fourth quarter of 2023. Noninterest income should continue near current levels with the anticipation of consistent fee income from our investments in treasury management and wealth and a seasonal softening in Q4 of mortgage lending.
The expected range of $10 million to $11 million in noninterest income in the fourth quarter and a total of $43 million to $44 million in 2023. Noninterest expenses continue to be proactively managed across the organization, specifically in segments of our business impacted by rising rates, such as mortgage and consumer lending. We also intend to invest in revenue-generating talent in our treasury management and commercial lending teams to contribute to top line in 2024. As a result, we expect noninterest expenses to range from about $35 million to $36 million in the fourth quarter. This would result in $142 million to $143 million of noninterest expense for the year. We also expect these expenses to rain below 1.85% of average assets for the fourth quarter and the full year. Our operating metrics, ROAA and ROAE are expected to be slightly lower in the next quarter. We anticipate ROAA to range from 75 and 80 basis points for the fourth quarter and between 85 and 90 basis points for the year. We expect ROAE to range from 8.5% to 9% for the fourth quarter and between 9.5% and 10% for the full year 2023. Finally, for the TCE ratio on December 31, we are expecting 6.6% to 6.8%. Now I will turn it over to Thomas for some final comments.
Thomas M. Prame
Thank you, Mark. So why invest in Horizon. Our investment thesis is simple. We're located in attractive Midwest growth markets. These markets have desirable economic environments, significant infrastructure investment and flourishing ecosystems for business and communities. Horizon continues to execute well on its strategy of shifting growth to higher-yielding assets while maintaining its conservative credit risk profile. Horizons demonstrated a track record of consistent underwriting and active portfolio management to ensure the success of our clients and our shareholders. The franchise has a stable and loyal deposit base with significant excess liquidity of $2.8 billion, providing flexibility and nimbleness to our funding strategies. And our disciplined operating culture consistently achieves a low annual ratio of operating expense to average assets, which we expect to be less than 1.85% for 2023. This is coupled with our annualized net charge-offs of only 2 basis points and historically low nonperforming loans. We are a very compelling value stock, support of our commitment to our dividend with a 5.9x P/E ratio and a 6% dividend yield. Horizon has a track record of 30-plus years of uninterrupted quarterly cash dividends to our shareholders. We thank you in advance for joining our presentation this morning. This concludes our prepared remarks. So now I'll ask the operator, please open up the line for questions.
Question and Answer Session
Operator
So we will now begin the question-and-answer session. (Operator's Instructions)
And our first question comes from Terry McEvoy from Stephens.
Terence James McEvoy
Maybe Mark, start with a question for you. Thanks for your thoughts on the fourth quarter net interest margin. Any thoughts on assuming the forward curve is correct, where you would expect the margin or when you'd expect the margin or possibly net interest income to bottom in the future?
Mark E. Secor
We think it's close. As we said, we think in the first quarter based on what the current expectations are in rates that it will trough by our modeling. We're seeing that and then start to tick up as we get into the second half of next year, barring any major rate change if we start to see the rates coming down in the second half of '24, we'll see more benefit. What we saw coming out of this quarter were the last 2 months that the margin stabilized. So we have a pretty good idea of what we're coming into going into the fourth quarter.
Terence James McEvoy
Great. And then just listening to your comments about investing in treasury management and open to hiring commercial teams. Any initial thoughts on how you manage expense growth in 2024?
Lynn M. Kerber
Terry, it's Lynn Kerber. Thanks for the question. Yes, we are looking at adding some additional staff in our treasury department. There are some additional expenses related to that staffing. The goal is to diversify our corporate deposit base better and the virtue of a lower cost of funding and that contribution that would help offset that staffing increase. On the commercial side, there's going to be some team members that will be adding some assets that would assist in paying for their salary. And I think it would be a fairly short payback on that.
Operator
And our next question comes from Nathan Race from Piper Sandler.
Nathan James Race
Just kind of thinking about getting to the margin guidance of $250 million to $255 million for the full year. I'm curious kind of what that contemplates in terms of the size of the earning asset base through the fourth quarter. Are you guys seeing an opportunity just based on your deposit pipeline to wind out some wholesale funding to maybe bring down the earning asset base? Or I guess I'm just trying to think about how to get to that $250 million to $255 expectations just given the lower margin expectations for fourth quarter.
Thomas M. Prame
Sure. Nathan, this is Tom. I appreciate the question. When we look at our asset side going into the fourth quarter, we're going to imagine it will be relatively consistent as we left the third quarter. We did have the excess cash position that we'll use to pay down any type of alcohol higher cost borrowing. When you look at our structured borrowing, it's actually at a relatively lower cost compared to overnight borrowings. So we would say our borrowing position will be relatively consistent going into the fourth quarter. Excess funds would be used to pay down any type of higher-priced borrowings, which would be most likely on the public funds side that we saw some elevation in the third quarter relatively consistent balance sheet going third and fourth quarter.
Mark E. Secor
Yes. And make that full year, if you recall, that's not adjusted, it's unadjusted, so it includes the swap gain that we received in the third quarter.
Nathan James Race
Got you. Understood. And then just kind of thinking about the trajectory of loan yields going forward in a higher for longer rate environment. Any color on just kind of what the new rate on production was in the third quarter and just how you're kind of thinking about kind of the trajectory of loan yields over the next few quarters, assuming the Fed pauses and just kind of the tailwinds that you guys have with some lows repricing going forward?
Lynn M. Kerber
This is Lynn Kerber, Relative to the commercial portfolio, we're really basing our new originations on current cost of funds. And so that's been generally very much in sync. Over the last year, as the rate increases have occurred, generally, there's a few week lag as our pipeline catches up to the new rate, depending on the rate structure and the terms of the funding. But overall, our margin over cost of funds for commercial has been pretty stable. And so if rates start to stabilize, I don't see that really having a lot of variation.
Nathan James Race
Got it. But it sounds like when kind of new production on a weighted average basis is still coming on nicely above the portfolio yield for now the third quarter.
Lynn M. Kerber
Yes, it is.
Thomas M. Prame
I can add. In the presentation, we have the average production for the last quarter for commercial was 7.5%. Consumer was just under 9% and mortgage was at 7.6%.
Nathan James Race
Okay. Great. And then just lastly, any thoughts on kind of share repurchase activities in the fourth quarter and early next year just given where the stock is trading today?
Thomas M. Prame
We have ability and we have, I think, 1.8 million shares in a plan that we could repurchase. But we've done quite a bit of valuation of what use of capital. And with the current cost of funds to give up cost of that cash to buy it. It doesn't appear stock repurchase right now is the best use, although it's always on the table and we're constantly looking at it.
Operator
[Operator's Instructions
Our next question comes from Damon DelMonte from KBW.
Damon Paul DelMonte
I just want to start off on credit. Obviously, very strong credit trends continue with you guys. But just wondering, are there any areas of your portfolio where you may be seeing some early signs of stress and maybe something tied to a particular industry or geography?
Lynn M. Kerber
As you see in our deck, we had a slight increase in past dues. And although it's still at only 30 basis points, which is a traditionally low past due percentage. Most of that was in our consumer portfolio. And as we reviewed those numbers, primarily automobile. And while the percent increase, if you look at our overall portfolio mix, we have been having a reduction in our indirect loan portfolio. And so that while a percent has increased, the dollar amount hasn't increased substantially there. Relative to charge-offs that did increase this quarter, and that was predominantly indirect auto.
Thomas M. Prame
A real quick follow-up on that. I know we've seen a lot in the industry around indirect auto and consumer charge-offs. I just ask as you review our results, please take a peek at Page 8. I think you'll see that even though Lynn said that we'll see a little bit increase in our consumer charge-offs simply because where the economy is, our consumer portfolio is a high-quality borrowers. And so we're expecting that our trends on consumer charge-offs, even though the industry may go in a different direction or are going to outperform there.
Damon Paul DelMonte
And then with respect to, I guess, a broader view on credit and you look at like where the reserve is, that's been steadily marching down since it obviously peaked during the COVID time like most others, where do you feel is a comfortable level to settle at? It's down to 1.14% as of this quarter. So how do we think about settling rate for the the reserve and then kind of using the provision line to keep that there.
Lynn M. Kerber
Yes. Thank you again. As we've shared at previous calls, during the pandemic, we had allocated quite a bit for certain sectors related to the COVID pandemic. And those portfolios, predominantly hotels and retail, those performed extremely well. In fact, it's really stellar. And so we had been releasing those reserves steadily over the last year. So what I think you'll see is that our reserve is returning to more core analysis based on historic loss rate and the economic forecast. And so I think as we move forward, it's going to be predominantly a function of that economic forecast. Our credit quality metrics all remain very low, as you can see. And if you look back over our history over the last business cycle, we performed generally about 75% of our peer group losses.
Mark E. Secor
Yes, this is Mark. You have to let the model drive the results and there is management judgment in there. But as you see the portfolios like indirect, which historically has our highest charge-up is shrinking. We're putting on assets in categories in mortgage, commercial that have much lower historical losses. So that also is contributing to this.
Damon Paul DelMonte
Got it. Okay. Mark, are you able to kind of like ballpark a rough estimate for provisioning going forward? I mean is it fair to look at the first 3 quarters of the year and kind of take that average and think that's doable here in the fourth quarter? Or do you think maybe just given changing in broader macro trends, we need to have a little bit higher provision.
Mark E. Secor
Lynn can add to this. But I think if you look at what we might be seeing in the last several quarters for charge-offs that we need to replace those. I think that probably is a good guidance of what we're looking at.
Damon Paul DelMonte
Okay. Great. And then just lastly, if I squeeze one more in. What's a good effective tax rate we should be using, I guess, for the fourth quarter and then as we look at 2024.
Mark E. Secor
Yes. Thanks for the question. The effective tax rate continues to go down as earnings, pretax earnings have come down from the last year. So it's hard to just say, peg a number. But I think where we are right now is pretty good going forward at around that 8%. And what's driving that is we continue to invest in solar tax credits, and they're having -- and we have obviously other tax free income from munis and such. But the solar credits are what's contributing a lot. And those were to continue to invest in those have a 20-year carryforward. So we want to continue to invest in those and use that to help keep the marginal rate down. So I think where we are right now is good guidance.
Operator
And our next question comes from David Long from Raymond James.
David Joseph Long
Just a couple of things here. The first one on Slide 17, and you discussed this in the formal comments, but the $25 million of scheduled securities cash flow this fourth quarter and then $120 million next year. Are there any prepayment assumptions built into that? Or are those simply just those that are contractually maturing?
Thomas M. Prame
It's contractually maturing and runoff.
David Joseph Long
Got it. Got it. So if there are prepayments, those numbers could be a little bit higher.
Thomas M. Prame
It could. And we see that once in a while, we'll see some bond get get recalled.
David Joseph Long
And then second question, as it relates to noninterest-bearing deposits, the contraction there seems to have stabilized a little bit for you guys. Where do you think that plays out over the next few quarters? Do you see more mix shifting still? And do you have like a percentage in mind that you think net interest-bearing will get to x percent of total deposits. How are you thinking about that level here in the near to intermediate term?
Thomas M. Prame
Usually, in the, what we see in the fourth quarter is we do take in some tax money from our public funds group that would cause perhaps the average to see relatively stable, if not slightly up there and then the consumer spending happens in the fourth quarter. The first quarter historically for our business model and our clients usually is an outflow of deposits as people think their tax payments dividend out there a company. So I would say we see a slight decline, but nothing of major concern probably just the seasonality that you saw from the first quarter of last year.
Operator
And we have a question now from Brian Martin from Janney Montgomery.
Brian Joseph Martin
Just wondering if you can talk a little bit about where the -- you talked about being a little bit more targeted on what you're thinking on loan growth and just kind of getting better yield. Just kind of where you're focused at today on -- it sounds like maybe indirect still have some continued runoff. But maybe just point us to a little bit there and just kind of the yield pickup you're expecting on that with the liquidity levels you guys have.
Thomas M. Prame
Thanks for the question. I'll start and I'll pass it over to Lynn to talk specifically about commercial. I'd say from a macro level on the balance sheet, our growth will still primarily be in the commercial and Lynn talked about the segments there. We're seeing a natural runoff this quarter of indirect, which is reflective of our pricing. I would anticipate on a go forward. The decline in that portfolio will be relatively neared for the next several quarters. Our consumer portfolio outside of that through the branches has been stable, a slight uptick. And then mortgage has been -- that one there has been a slight up and that's really because our prepayments are slowing down on that. The originations are relatively consistent with about -- as we talked about before, about 25% of the originations going on the balance sheet, but we're seeing slowdown in payments there, which is giving the just, I'd say, modestly up. And I'll pass it over to Lynn to talk about the commercial growth in the various segments.
Lynn M. Kerber
I can direct you to Page 6 of our slide deck. We've got a portfolio composition for the commercial portfolio. This has been very consistent. You'll see that our nonowner-occupied as 48%, C&I is 25%, and our owner-occupied is 23%. This has been very consistent over the last several years. And when you break down our quarterly pipeline and new originations, it virtually mirrors this mix. As I made in my commented in my comments earlier, we have been seeing some increase in C&I this quarter. It was 33% versus our portfolio composition of 25%. And this is a continuation of a trend that we've been seeing over the last year as we seek to diversify into that sector a little bit more. And that will be a continued trend as we go into next year. expanding some efforts into C&I.
Brian Joseph Martin
Okay. And the yield the yield pickup you're getting on that liquidity then with this type of loan growth is the average yield of mark, I guess, figures we talked about what the number was. Is that kind of what we should expect on -- as far as the pickup goes?
Thomas M. Prame
Yes. Our pricing and the pickup that you saw in the deck should be consistent as we go in the fourth quarter.
Brian Joseph Martin
Okay. All right. And Thomas, I don't know if you can give any update on just -- I think you got -- you talked last quarter about potentially looking at restructuring the bond book, just kind of where you're at there, what kind of you guys are still looking at that?
Thomas M. Prame
Thank you for the question. I think, as Mark alluded, we're always looking for the best use of capital from where we could put that, whether that's share buybacks, security repositioning or leveraging the balance sheet. Right now, we're still evaluating that. For us, it's really our view where the forward curve is going to be as we saw what happened with the curve here this quarter, expectations where the terminal rate changed and what next year will look like. So as we get some more stability in view of what 2024 look like, we'll probably sit down with our Board and our leadership team around the capital deployment there. Understanding, of course, we still have margin pressures here, but we're still very optimistic about the strength of our deposit portfolio. And as Mark talked about earlier, we believe that our margin is probably at the bottom of the trough now as we move into 2024.
Brian Joseph Martin
Perfect. That's helpful. And just maybe one last one for Mark. Just on the margin mark. Do you have the spot margin for the month of September? I know it sounds like it was bottoming.
Mark E. Secor
Yes. On adjusted, we were at 239.
Operator
And this concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.
Thomas M. Prame
Thank you, Marliese, and appreciate your help today. Also want to thank everyone for participating in our earnings call today. We believe our in-market revenue opportunities, the valuable deposit franchise, credit culture, expense management discipline have positioned Horizon well for the final months of 2024. We appreciate your interest and investment in Horizon, and we look forward to speaking to you in the next quarterly call that will happen in January. In the meantime, don't hesitate to reach out with any questions. And have a wonderful holiday season. Thank you.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Have a good day.
